Principles of Macroeconomics - Test Item File 1 Ninth Edition by Case / Fair / OsterChapter 1 The Scope and Method of Economics
... [Show More] ...........................................................................1 Chapter 2 The Economic Problem: Scarcity and Choice.............................................................28 Chapter 3 Demand, Supply, and Market Equilibrium................................................................55 Chapter 4 Demand and Supply Applications..............................................................................95 Chapter 5 Introduction to Macroeconomics...............................................................................116 Chapter 6 Measuring National Output and National Income.................................................139 Chapter 7 Unemployment, Infation, and Long Run Growth .................................................169 ‐ Chapter 8 Aggregate Expenditure and Equilibrium Output...................................................199 Chapter 9 The Government and Fiscal Policy............................................................................239 Chapter 10 The Money Supply and the Federal Reserve System..............................................278 Chapter 11 Money Demand and the Equilibrium Interest Rate................................................307 Chapter 12 Aggregate Demand in the Goods and Money Markets..........................................340 Chapter 13 Aggregate Supply and the Equilibrium Price Level ...............................................383 Chapter 14 The Labor Market in the Macroeconomy .................................................................419 Chapter 15 Policy Timing, Deficit Targeting, and Stock Market Effects ..................................455 Chapter 16 Household and Firm Behavior in the Macroeconomyha Further Look ..............493 Chapter 17 Long Run Growth........................................................................................................535 ‐ Chapter 18 Debates in Macroeconomics: Monetarism, New Classical Theory, and Supply Side Economics.......................................................................................566 ‐ Chapter 19 International Trade, Comparative Advantage, and Protectionism.......................598 Chapter 20 Open Economy Macroeconomics: The Balance of Payments ‐ and Exchange Rates.....................................................................................................635 Chapter 21 Economic Growth in Developing and Transitional Economies ............................667 Chapter 1 The Scope and Method of Economics 1.1 Why Study Economics? 1 Multiple Choice 1) Which of the following is NOT listed in the book as a reason to study economics? A) to learn a way of thinking B) to understand society and global affairs C) to be an informed voter D) to learn how to make lots of money Byeha Diff: 1 Topic: Why Study Economics? Skill: Fact 2) Among the fundamental concepts in economics are A) opportunity cost. B) marginalism. C) efficient markets. D) all of the above Byeha Diff: 1 Topic: Why Study Economics? Skill: Fact 3) Which of the following is the best definition of economics? A) the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided B) the study of how consumers spend their income C) the study of how business firms decide what inputs to hire and what outputs to produce D) the study of how the federal government allocates tax dollars Byeha Diff: 2 Topic: Why Study Economics? Skillhaefinition 4) The rise of the modern factory system in England during the late eighteenth and early nineteenth centuries is known as the A) Great Migration. B) Industrial Revolution. C) Wealth of Nations. D) Dark Ages. Byeha Diff: 1 Topic: Why Study Economics? Skill: Fact 5) Which of the following statements is NOT correct? A) Economics is a behavioral science. B) In large measure, economics is the study of how people make choices. C) If poverty was eliminated there would be no reason to study economics. D) Economic analysis can be used to explain how both individuals and societies make decisions. Byeha Diff: 1 1 Topic: Why Study Economics? Skill: Fact 6) The study of economics A) is a very narrow endeavor. B) is a way of analyzing decision-making processes caused by scarcity. C) is concerned with proving that capitalism is better than socialism. D) focuses on how a business should function. Byeha Diff: 2 Topic: Why Study Economics? Skillhaefinition 7) Sunk costs are A) costs that cannot be avoided, because they have already been incurred. B) the costs of what we give up when we make a choice or a decision. C) the additional costs of producing an additional unit of a product. D) the additional costs of consuming an additional unit of a product. Byeha Diff: 2 Topic: Why Study Economics? Skillhaefinition 8) Suppose that you purchased a ticket to a jazz festival for $100 a month ago. Last week someone invited you to a hockey game on the same night as the jazz festival. You would much rather go to the hockey game than the jazz festival. You have tried unsuccessfully to sell the jazz festival ticket. Which of the following statements regarding this situation is correct? A) The $100 you paid for the jazz festival ticket is relevant to the decision, as this represents the opportunity cost of attending the hockey game. B) You should base your decision on whether or not the hockey game will provide you with more than $100 in satisfaction. C) The $100 you paid for the jazz festival ticket should be irrelevant in your decision making, because it is a sunk cost. D) The $100 jazz festival ticket should be irrelevant in your decision making, because it represents the marginal cost of attending the hockey game. Byeha Diff: 2 Topic: Why Study Economics? Skillhaonceptual AACSB: Reflective Thinking 9) You have decided that you want to attend a costume party as Ironman. You estimate that it will cost $40 to assemble your costume. After spending $40 on the costume, you realize that the additional pieces you need will cost you $25 more. The marginal cost of completing the costume is A) $15. B) $25. C) $40. D) $65. Byeha Diff: 2 Topic: Why Study Economics? Skillhanalytic AACSBhanalytic Skills 10) The concept of opportunity cost 2 A) is relevant only to economics. B) can be applied to the analysis of any decision-making process. C) applies to consumers but not to firms. D) refers only to actual payments and incomes. Byeha Diff: 2 Topic: Why Study Economics? Skillhaonceptual AACSB: Reflective Thinking 11) Opportunity cost is A) that which we forgo, or give up, when we make a choice or a decision. B) a cost that cannot be avoided, regardless of what is done in the future. C) the additional cost of producing an additional unit of output. D) the additional cost of buying an additional unit of a product. Byeha Diff: 2 Topic: Why Study Economics? Skillhaefinition 12) The reason that opportunity costs arise is that A) an economy relies on money to facilitate exchange of goods and services. B) resources are scarce. C) there are no alternative decisions that could be made. D) people have limited wants. Byeha Diff: 1 Topic: Why Study Economics? Skill: Fact 13) Which of the following is NOT an opportunity cost of attending college? A) the tuition you pay B) the income you could have earned if you didn t attend college ʹ C) the alternative uses of the time you spend studying D) the cost of the food that you consume while you are attending college Byeha Diff: 3 Topic: Why Study Economics? Skillhaonceptual AACSB: Reflective Thinking 14) If your tuition is $5,000 this semester, your books cost $600, you can only work 20 rather than 40 hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your room and board is $3000 this semester, then your opportunity cost of attending college this semester is A) $5,600. B) $5,900. C) $10,100. D) $11,600. Byeha Diff: 3 Topic: Why Study Economics? Skillhanalytic AACSBhanalytic Skills 3 15) If your tuition is $25,000 this semester, your books cost $1,500, you can only work 20 rather than 40 hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your room and board is $7,500 this semester, then your opportunity cost of attending college this semester is A) $26,500. B) $26,800. C) $31,000. D) $38,500. Byeha Diff: 3 Topic: Why Study Economics? Skillhanalytic AACSBhanalytic Skills 16) If you own a building and you decide to use that building to open a book store, A) there is no opportunity cost of using this building for a book store because you own it. B) there is an opportunity cost of using this building for a book store because it could have been used in other ways. C) there are no sunk costs involved in this decision. D) the only cost relevant to this decision is the price you paid for the building. Byeha Diff: 2 Topic: Why Study Economics? Skillhaonceptual AACSB: Reflective Thinking 17) You own the Star Wars six DVD set. The opportunity cost of watching these DVDs for the second time A) is zero. B) is one-half the cost of the DVDs, as this is the second time you have watched it. C) is the value of the alternative use of the time you spend watching the DVDs. D) cannot be calculated. Byeha Diff: 2 Topic: Why Study Economics? Skillhaonceptual AACSB: Reflective Thinking 18) That which we forgo, or give up, when we make a choice or decision is called A) sunk cost. B) marginal cost. C) real cost. D) opportunity cost. Byeha Diff: 1 Topic: Why Study Economics? Skillhaefinition 19) Costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred are A) total costs. B) sunk costs. C) marginal costs. D) allocative costs. Byeha Diff: 1 Topic: Why Study Economics? Skillhaefinition 4 20) If you can buy 9 DVDs for $126 or you could buy 10 DVDs for $130, then the marginal cost of the tenth DVD is: A) $4. B) $13. C) $14. D) $130. Byeha Diff: 2 Topic: Why Study Economics? Skillhanalytic 21) If you eat at a sushi restaurant that charges $20 for its all you can eat sushi special, then the marginal cost of your 10th piece of sushi is A) zero. B) $2. C) $200.D) $2,000. Byeha Diff: 2 Topic: Why Study Economics? Skillhanalytic AACSBhanalytic Skills 22) A market in which profit opportunities are eliminated almost instantaneously is A) a laissez-faire market. B) a capitalist market. C) a socialist market. D) an efficient market. Byeha Diff: 2 Topic: Why Study Economics? Skillhaefinition 23) If information is less costly and more easily available, then usually this A) makes markets more efficient. B) makes markets less efficient. C) increases profit opportunities. D) increases the opportunity cost of acquiring more information. Byeha Diff: 3 Topic: Why Study Economics? Skillhaonceptual AACSB: Reflective Thinking 24) An efficient market is a market A) in which everyone always gets what they want. B) in which profit opportunities are eliminated almost instantaneously. C) in which profits are always very high and persistent. D) in which opportunity costs are zero. Byeha Diff: 2 Topic: Why Study Economics? Skillhaefinition 25) Related to the Economics in Practice on p. 6: Which one of the following best supports the argument that most of the value of Apple s iPod is in its conception and design? ʹ A) Apple s history of innovative product design includes the earliest use of a Graphic User ʹ Interface (GUI) in the home computer market. B) The iPod would not have been as successful without the development of Web sites that allow users to purchase and download music. 5 C) Companies that assemble the iPod and those that manufacture iPod components together capture only a small fraction of the iPod s retail value. ʹ D) Increases in the costs of components will reduce the profitability of the iPod, although price increases can be passed on to consumers. Byeha Diff: 3 Topic: Why Study Economics?: Economics in Practice Skillhanalytic AACSBhanalytic Skills 26) Related to the Economics in Practice on p. 6: Which one of the following best explains why Apple s iPod is neither a pure import nor a pure export? ʹ A) The iPod has earned a large share of the market for portable music players in both the United States and other industrialized nations. B) Intellectual property laws protect the iPod in both domestic and international markets, although enforcement of those laws varies widely between countries. C) Apple stock is publicly traded, and so citizens of any country can own Apple stock. D) The iPod was designed and is sold by a U.S. company, but it is assembled in China from parts made in the United States and other countries. Byeha Diff: 3 Topic: Why Study Economics?: Economics in Practice Skillhanalytic AACSBhanalytic Skills 2 Ha/Ha 1) Resources are unlimited in a wealthy society. Bye: HA Diff: 1 Topic: Why Study Economics? Skill: Fact 2) The value of the best alternative foregone is the opportunity cost of making a decision. Bye: HA Diff: 1 Topic: Why Study Economics? Skillhaefinition 3) Opportunity costs arise due to scarce resources. Bye: HA Diff: 1 Topic: Why Study Economics? Skill: Fact 4) Sunk costs do not affect marginal decision making. Bye: HA Diff: 2 Topic: Why Study Economics? Skillhaonceptual AACSB: Reflective Thinking 5) Marginal costs are those that can not be recaptured. Bye: HA 6 Diff: 1 Topic: Why Study Economics? Skill: Fact 1.2 The Scope of Economics 1 Multiple Choice 1) The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units is A) positive economics. B) normative economics. C) macroeconomics. D) microeconomics. Byeha Diff: 2 Topic: The Scope of Economics Skillhaefinition 2) Studying how the management of Hewlett Packard decides how many computers to produce and the price to charge for its computers would be considered A) descriptive economics. B) empirical economics. C) microeconomics. D) macroeconomics. Byeha Diff: 2 Topic: The Scope of Economics Skillhaonceptual AACSB: Reflective Thinking 3) Studying how Joshua allocates his time between school and video games is an example of A) macroeconomics. B) microeconomics. C) industrial organization. D) descriptive economics. Byeha Diff: 1 Topic: The Scope of Economics Skillhaonceptual AACSB: Reflective Thinking 4) The study of how benefits are determined for city employees would be considered A) microeconomics. B) macroeconomics. C) descriptive economics. Byeha Diff: 1 Topic: The Scope of Economics Skillhaonceptual AACSB: Reflective Thinking 5) Infation and unemployment D) institutional economics. A) are the focus of normative economics. B) are a focus of microeconomics. C) are a focus of positive economics. D) are a focus of macroeconomics. Byeha Diff: 1 Topic: The Scope of Economics Skill: Fact 7 2 Ha/Ha 1) The rate of economic growth is a topic of microeconomics. Bye: HA Diff: 1 Topic: The Scope of Economics Skillhaonceptual AACSB: Reflective Thinking 2) The aggregate price level is a topic of macroeconomics. Bye: HA Diff: 2 Topic: The Scope of Economics Skillhaonceptual AACSB: Reflective Thinking 1.3 The Method of Economics 1 Multiple Choice 1) Better insurance benefits increase the incentive of some individuals to work. This statement is best described as a A) positive statement. B) Marxist ideology. C) normative statement. D) descriptive economics statement. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 2) The Bureau of Labor Statistics announced that the unemployment rate fell by one percentage point. This is best described as A) an economic model. B) Marxist ideology. C) a normative statement. D) descriptive economics. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 3) The amount of education that one has is an important factor in the determination of his or her wage rate. This is best described as A) a positive statement. B) Marxist ideology. C) a normative statement. D) descriptive economics. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 4) The cost involved when choosing between alternatives is known as the A) marginal cost. B) sunk cost. C) opportunity cost. D) normative cost. 8 Byeha Diff: 2 Topic: The Method of Economics Skillhaefinition 5) Positive economics is an approach to economics that A) seeks to understand behavior and the operation of systems while making judgments about their usefulness to society. B) analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe preferred courses of action. C) applies statistical techniques and data to economic problems. D) examines the role of government in the economy. Byeha Diff: 1 Topic: The Method of Economics Skill: Fact 6) Normative economics is an approach to economics that A) seeks to understand behavior and the operation of systems without making judgments. B) analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe preferred courses of action. C) applies statistical techniques and data to economic problems. D) examines the role of government in the economy. Byeha Diff: 1 Topic: The Method of Economics Skill: Fact 7) Which of the following is a normative question? A) Why do gasoline prices increase between Memorial Day and Labor Day? B) What will happen to gasoline consumption if the federal tax on gasoline is eliminated? C) To reduce the regressive nature of the gasoline excise tax, should the portion of the gasoline excise tax paid by high-income individuals be increased? D) How will oil exploration be affected if the government subsidizes oil producers? Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 8) Which of the following is a positive question? A) Will the level of teenage unemployment increase if the minimum wage is increased? B) Should the minimum wage be set at one-half the average manufacturing wage to guarantee individuals a decent standard of living? C) Wouldn t it be more equitable if the minimum wage increased automatically with the ʹ cost of living? D) Wouldn t it be better to try to increase people s wages through job ʹ ʹ -training programs rather than by requiring employers to pay minimum wages? Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 9 9) Health insurance should be provided to every citizen in a wealthy nation such as the United States. This statement is best described as A) a positive statement. B) a normative statement. C) a descriptive economics statement. D) an implication of an efficient market. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 10) There is great concern over the fact that millions of Americans do not have health insurance. A study of the costs and benefits of implementing a national health-insurance program is an example of A) laissez-faire economics. B) positive economics. C) labor economics. D) normative economics. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 11) Descriptive economics A) identifies actions and reactions. B) requires model building. C) looks at the outcomes of economic behavior and asks if they are good or bad. D) mainly involves the compilation of data that describe phenomena and facts. Byeha Diff: 2 Topic: The Method of Economics Skillhaefinition 12) An example of descriptive economics is when an economist A) collects data on the wage rates and employment levels in the farming industry. B) tries to develop a model to explain the changes in employment and wages in the farming industry. C) tries to understand the relationship between the price of imported agricultural products and the level of employment in the U.S. farming industry. D) tries to determine if there are any regular patterns in the employment levels in the farming industry and then makes generalizations from these patterns. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking Refer to Scenario 1.1 below to bye the questions that follow. SCENARIO 1.1han economist wants to understand the relationship between minimum wages and the level of teenage unemployment. The economist collects data on the values of the minimum wage and the levels of teenage unemployment over time. The economist concludes that a 1% increase in minimum wage causes a 0.2% increase in teenage unemployment. From this information he concludes that the 10 minimum wage is harmful to teenagers and should be reduced or eliminated to increase employment among teenagers. 13) Refer to Scenario 1.1. The statement that a 1% increase in the minimum wage causes a 0.2% increase in teenage unemployment is an example of A) descriptive economics. B) normative economics. C) positive economics. D) Marxist economics. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 14) Refer to Scenario 1.1. The statement, the minimum wage is harmful to teenagers and should ʺ be reduced or eliminated to increase employment among teenagers, is an example of ʺ A) descriptive economics. B) normative economics. C) positive economics. D) Marxist economics. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 15) Refer to Scenario 1.1. The process of collecting data on minimum wage and teenage unemployment levels is an example of A) law and economics. B) economic history. C) econometrics. D) descriptive economics. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 16) Refer to Scenario 1.1. The statement that an increase in the minimum wage causes an increase in teenage unemployment is an example of A) descriptive reasoning. B) an economic theory. C) normative economics. D) deductive reasoning. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 17) Refer to Scenario 1.1. A graph of the value of the minimum wage on one axis and the level of teenage unemployment on the other axis is an example of A) an economic theory. B) an economic model. C) inductive reasoning. D) a variable theory. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 11 18) To isolate the impact of one single factor, economists invoke the assumption of A) inductive reasoning. B) Ockham s razor. ʹ C) ceteris paribus. D) post hoc, ergo prompter hoc. Byeha Diff: 2 Topic: The Method of Economics Skillhaefinition 19) The principle that irrelevant detail should not be included in a model is known as A) Say s Identity. ʹ B) ceteris paribus. C) Ockham s razor. ʹ D) Hobson s choice. ʹ Byeha Diff: 2 Topic: The Method of Economics Skillhaefinition 20) Economists use the phrase ceteris paribus to express the assumption ʺ ʺ A) ʺ ʺ all else equal. B) everything affects everything else. ʺ ʺ C) scarcity is a fact of life. ʺ ʺ D) there is no such thing as a free lunch. ʺ ʺ Byeha Diff: 2 Topic: The Method of Economics Skillhaefinition 21) The Latin phrase economists use that means all else equal is: A) ʺ ʺ ceteris paribus. B) cogito ergo sum. ʺ ʺ C) carpe diem. ʺ ʺ D) caveat emptor. ʺ ʺ Byeha Diff: 2 Topic: The Method of Economics Skillhaefinition 22) Stanley Jevons, an economist in the nineteenth century, noted a high correlation between economic prosperity and sunspots. Based on this observation he developed a sunspot theory ʺ ʺ of how the economy operated. We now know that Jevons A) committed the fallacy of composition. B) committed the ceteris paribus error. C) was too quick to conclude that correlation implies causation. D) showed good reasoning for the nineteenth but not the twentieth century. Byeha Diff: 3 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 23) Whenever the Democrats gain control of the Congress, spending on social programs increases; whenever Republicans gain control of the Congress, spending on defense increases. Hence, we know what the next party in control will do. This statement is an example of A) fallacy of inductive reasoning. B) post hoc, ergo prompter hoc fallacy. C) fallacy of composition. D) ceteris paribus fallacy. Byeha Diff: 2 Topic: The Method of Economics 12 Skillhaonceptual AACSB: Reflective Thinking 24) I have lived in a house on the Mississippi River for many years and have never seen a food. Therefore, there is no reason for anyone to buy food insurance. This statement is an example of A) fallacy of composition. B) post hoc, ergo prompter hoc fallacy. C) fallacy of inductive reasoning. D) ceteris paribus fallacy. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 25) The economy was expanding during all of the years that I was a student, but as soon as I graduated, the economy contracted. Therefore, the labor market was waiting until I started looking for a job to contract. This statement is an example of A) ceteris paribus fallacy. B) post hoc, ergo prompter hoc fallacy. C) fallacy of composition. D) fallacy of inductive reasoning. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 26) Experimental research in small cities suggests that mandating work for welfare recipients increases their income. Therefore, we should mandate work requirements for all welfare recipients. This statement is an example of A) fallacy of inductive reasoning. B) ceteris paribus fallacy. C) fallacy of composition. D) post hoc, ergo prompter hoc fallacy. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 27) Rent control laws are imposed when city officials believe landlords have been exploiting tenants. Which of the following criteria are they using to guide their actions? A) efficiency B) equity C) growth D) stability Byeha Diff: 3 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 28) A government policy that tries to minimize infation and unemployment can best be described as trying to achieve economic A) efficiency. B) equity. C) profitability. D) stability. Byeha Diff: 3 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 13 29) Redistribution of income from the rich to the poor is achieved from a tax system that requires taxes to rise with income. Which of the following criteria best explains the goal of this tax system? A) efficiency B) equity C) growth D) stability Byeha Diff: 3 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 30) You know that the computer lab at school gets very crowded at about 3:00 p.m. To avoid the crowds, you start going to the computer lab one hour earlier every day. However many students make the same decision, and now the computer lab becomes very crowded at 2:00 p.m. This is an example of the A) post hoc, ergo prompter hoc fallacy. B) ceteris paribus fallacy. C) fallacy of division. D) fallacy of composition. Byeha Diff: 3 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 31) It always rains about an hour after you finish washing your car. Concluding that washing your car caused it to rain is an example of the A) fallacy of composition. B) post hoc, ergo prompter hoc fallacy. C) fallacy of inductive reasoning. D) ceteris paribus conditions. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 32) At a political rally, you stand up to see better. Everyone else stands up, as well. This is an example of A) ceteris paribus. B) the post hoc, ergo prompter hoc fallacy. C) the fallacy of composition. D) Ockham s razor. ʹ Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 33) You have observed that every time you do 30 minutes of cardio exercise before taking an exam you get an A. You therefore conclude that to get an A on an exam, all you have to do is 30 minutes of cardio exercise before you take an exam. You have committed the A) fallacy of composition. B) fallacy of inductive reasoning. C) post hoc, ergo prompter hoc fallacy. D) fallacy of division. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual 14 AACSB: Reflective Thinking 34) If you observe that Event A happens before Event B happens, and you conclude that Event A caused Event B, you would be guilty of an error called the A) fallacy of composition. B) fallacy of inductive reasoning. C) fallacy of ceteris paribus. D) post hoc, ergo prompter hoc fallacy. Byeha Diff: 2 Topic: The Method of Economics Skillhaefinition 35) Two variables are said to be ________ if one variable changes when the other variable changes. A) causally related B) correlated C) statistically related D) dependent Byeha Diff: 2 Topic: The Method of Economics Skillhaefinition 36) The fallacy of composition is A) the belief that if Event A happens before Event B happens, then Event A causes Event B to occur. B) the belief that what is ha for the whole is necessarily ha of the parts. C) the belief that what is ha for a part is necessarily ha for the whole. D) the belief that it is impossible to draw generalizations about cause and effect. Byeha Diff: 2 Topic: The Method of Economics Skillhaefinition 37) The collection and use of data to test economic theories is A) empirical economics. B) descriptive economics. C) normative economics. D) positive economics. Byeha Diff: 2 Topic: The Method of Economics Skillhaefinition 38) A change in economic output is potentially efficient A) if the value of the resulting gains exceeds the value of the resulting losses. B) if the value of the resulting gains exactly equals the value of the resulting losses. C) only if no one is made worse off. D) if the value of the resulting gains is less than the value of the resulting losses. Byeha Diff: 3 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 39) An efficient economy is an economy A) in which output is steady or growing and there is low infation. B) that produces what consumers demand and does so at the least possible cost. C) that distributes output equally among all consumers. 15 D) in which there is a fair distribution of wealth. Byeha Diff: 2 Topic: The Method of Economics Skillhaefinition 40) An efficient market is characterized by the fact that A) output is steady or growing and there is low infation. B) profit opportunities are eliminated almost instantaneously. C) there are no opportunity costs. D) wealth is distributed fairly. Byeha Diff: 1 Topic: The Method of Economics Skill: Fact 41) The four criteria that are frequently used in judging the outcome of economic policy are A) efficiency, equity, stability, and economic growth. B) efficiency, equality, stability, and economic growth. C) efficiency, equality, profitability, and stability. D) efficiency, equity, profitability, and stability. Byeha Diff: 1 Topic: The Method of Economics Skill: Fact 42) You have noticed that there is an increase in the number of homeless people in your city. At the same time you observe that there are also a number of vacant apartments. You believe that the government could reduce the number of homeless people if landlords were required to rent their apartments for less than they are currently charging. This policy recommendation would be motivated by concerns over A) efficiency. B) equity. C) economic growth. D) stability. Byeha Diff: 3 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 43) There is a possibility that a national sales tax will be implemented. Many economists argue that items such as food and clothing should be exempt from such a tax because low-income people spend a greater percentage of their income on these goods than do high-income individuals. This argument is motivated by concerns over A) economic growth. B) economic stability. C) efficiency. D) equity. Byeha Diff: 3 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 44) Which of the following is an example of a normative statement? A) The unemployment rate is six percent. 16 B) There should be no unemployment in an advanced industrial society. C) Higher prices cause consumers to buy less. D) Equilibrium price implies that quantity demanded equals quantity supplied. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 45) Which of the following is an example of a positive statement? A) There should be no unemployment in an advanced industrial society. B) Higher prices cause consumers to purchase less. C) Consumption should be distributed fairly in society. D) People should pollute as little as possible. Byeha Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 2 Ha/Ha 1) Normative economics looks at outcomes of economic behavior and evaluates them as good or bad. Bye: HA Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 2) Positive economics looks at outcomes of economic behavior and evaluates them as good or bad. Bye: HA Diff: 2 Topic: The Method of Economics Skillhaonceptual AACSB: Reflective Thinking 3) An efficient economy is one that produces what consumers demand and does so at the least possible cost. Bye: HA Diff: 2 Topic: The Method of Economics Skillhaefinition 4) ʺ ʺ ʺ ʺ Ceteris paribus literally translated means, buyer beware. Bye: HA Diff: 2 Topic: The Method of Economics Skillhaefinition 5) Positive economics seeks to understand behavior, but not make judgments. Bye: HA [Show Less]